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How Not To Make Gold Money

Commodities / Gold and Silver 2013 Mar 14, 2013 - 12:11 PM GMT

By: Jeff_Berwick

Commodities

Ed Bugos writes: Can gold be the money of the free market if the violent monopoly of government gets behind the effort? This utterly wrong notion is what Ralph Benko seems to be suggesting in his recent article on NationalInterest.org titled "How to Go Gold".

Basically Benko sees a return to gold through world government initiative and collaboration, starting with the US president. He appears to cite evidence that this is underway, starting with the central bank's buying of gold. Then Benko concludes by citing Lewis Lehrman's 5 steps back to a "classical" gold standard:


Step 1. America leads by the president announcing unilateral resumption of the gold monetary standard at a certain date, not more than four years in the future (allowing for a market adjustment period).

Step 2. The president issues an executive order eliminating any and all taxes imposed on the buying, selling and circulation of gold.

Step 3. Shortly after the announcement in Step 1, the United States calls for an International Monetary Conference of interested nations to provide for multilateral currency convertibility to gold, and the deliberate termination of the dollar-based official reserve currency system.

Step 4. The conference agreement -- attended by representatives of the BIS, IMF, WTO, and the World Bank -- would establish gold as the means by which nations would settle residual balance-of-payments deficits.

Step 5. A multilateral international gold standard -- the result of the currency convertibility agreement -- would effectively terminate floating exchange rates, reestablishing stable exchange rates among the major nations.

Obviously I disagree with this stupid idea. Lehrman is Ron Paul's ally from back in the Reagan days (when they were the only two on Reagan's gold standard commission who actually favored going to gold), though Paul appears to have moved increasingly towards anarcho-capitalism since then.

But the above solution is anything but an anarchist (read "a true free market") one. The obvious reason: there is no mention of doing away with the underpinnings of the Fed, for one (the Fed being backed by the coercion of government). That is to say, there is no repealing the Fed's legal tender and other monopoly privileges or the government's protection of such, and allowing the market to determine what should be the instrument of sound money. (Hint: the market may not choose gold as sound money.)

We may think gold would be the market's first choice as sound money, but the market (i.e. all of us) choosing is different than having the choice imposed via government.

About 10 years ago I wrote an essay about how central banking and sound money are mutually exclusive -- that they cannot co-exist in the same economy anymore than lovemaking and rape can co-exist in the same act. It has to be one OR the other. Hence, the return to sound money cannot be achieved without ending the Fed. Keeping the Fed with a gold standard would lead to something like the bad experience Britain had when it tried to return to a preward ratio of gold to the British pound.

What are the steps that we as anarcho-capitalists actually recommend for going back to "sound money"? Here are some basic suggestions off the top of my head:

1. Repudiate the Public Debt

2. End the Fed

3. Liquidate all government regulatory bodies

4. Limit or abolish the taxing power of the federal government

5. Repeal all remaining industry protections and subsidies

6. Let the chips fall where they may.

You may wonder if there would be too much chaos this way. But I have to wonder if there would be too much chaos any other way.

Of course, the world is likely going the "other" way. Governments are probably not going to take my suggestions to get out of the way. They'll keep borrowing, taxing, regulating and monopolizing the money supply. And it will all end painfully. That's why we provide our TDV newsletter subscribers with our best actionable advice to come out wealthier despite the government's attack on their prosperity. You can learn more about that by clicking here.

Regards,

Ed Bugos

Ed Bugos, with a strong background in Austrian economics, is one of the world's most sought after and respected mining analysts.  Based out of the global epicenter for gold mining exploration and financing, Vancouver, Canada, he has been writing publicly since the late ‘90s and is a well known critic of government interventions, central banking and the Federal Reserve since 2000, starting as the original contributing editor for Safehaven.com.  Ed founded goldenbar.com in 2001, a website publishing his gold & currency digest portending the collapse of the strong dollar policy and the rise of the secular bull market in gold and commodities. He was one of the first to make the call for $2,000 gold (he now is calling for $5,000-$10,000 gold), back when it was still struggling with $300 per ounce and it was a sin to own it.

Anarcho-Capitalist.  Libertarian.  Freedom fighter against mankind’s two biggest enemies, the State and the Central Banks.  Jeff Berwick is the founder of The Dollar Vigilante, CEO of TDV Media & Services and host of the popular video podcast, Anarchast.  Jeff is a prominent speaker at many of the world’s freedom, investment and gold conferences as well as regularly in the media.

© 2013 Copyright Jeff Berwick - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Jeff Berwick Archive

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